The Compassionate Friends was founded in Coventry, England in 1969, following the deaths of two young boys, Billy Henderson and Kenneth Lawley, the previous spring. Billy and Kenneth had died just three days apart in the Coventry and Warwickshire Hospital where Rev. Simon Stephens was Assistant to the Chaplain. Simon mentioned Billy's death to Iris and Joe Lawley, and the Lawleys decided to send flowers to Billy's funeral. The signed the card simply, "Kenneth's parents," realizing that the Hendersons would know who they were.

Bill and Joan Henderson then invited the Lawleys over for tea, and an immediate bond was formed as the two couples spoke freely about their boys, sharing their memories and the dreams that had died with Billy and Kenneth. They continued to get together regularly, and young Rev. Stephens, then only 23, encouraged them to invite other newly bereaved parents to join them. In 1969 another grieving mother accepted their invitation to meet with Simon and the two couples. They decided to organize as a self-help group and actively begin reaching out to newly bereaved parents in their community. Because the word "compassionate" kept coming up, this new organization was called "The Society of the Compassionate Friends."

Simon became a chaplain in the British Royal Navy in the 70's. He was met by bereaved parents at ports around the world, and he helped them to develop their own chapters. TCF had become well-known through U.K. and U.S.A. editions of such magazines as Time and Good Housekeeping. Paula and Arnold Shamres of Florida read Simon's interview in Time Magazine and invited him to visit them in Florida and speak to bereaved parents there. He did, and the Shamres subsequently founded the first U.S. chapter in 1972. Word of the organization spread rapidly through interest generated by the Phil Donahue Show and the columns of Dear Abby and Ann Landers.

The Compassionate Friends was incorporated in the United States as a non-profit organization in 1978.

In 1989 The Compassionate Friends of Great Britain dedicated a plaque commemorating the founding of the organization, at the Coventry and Warwickshire Hospital where TCF had begun. The plaque was unveiled by their patron, Countess Mountbatten, herself a bereaved parent.

Then in November, 1994 Queen Elizabeth presented Iris Lawley with a medal, The Most Excellent Order of the British Empire, in recognition of her work on behalf of TCF.

There are now Compassionate Friends chapters in every state in the United States—almost 600 altogether—and hundreds of chapters in Canada, Great Britain and other countries throughout the world. In the United States, chapters are open to all bereaved siblings and other family members who are grieving the death of a child of any age, from any cause.

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